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Former Missouri construction company owner sentenced to 18 months in prison, fined $100,000 for fraud scheme

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KTTN News
June 16, 2023

U.S. District Judge Henry E. Autrey on Thursday sentenced a former construction company owner to 18 months in prison and a $100,000 fine for committing fraud to qualify for tax abatements designed to encourage minority-owned businesses in St. Louis.

Brian Kowert Sr. “engaged in an elaborate ‘pass through’ fraud scheme where he used an elderly Black contractor solely to pass company checks through to the non-minority subcontractors who Kowert hired to do the actual work and supply the actual materials on the project,” Assistant U.S. Attorney Hal Goldsmith wrote in a sentencing memorandum. Kowert also knew what he was doing was wrong, as he committed a similar Minority Business Enterprise fraud 17 years ago, Goldsmith wrote.

Kowert was co-owner and chief operating officer of Clayton, Missouri-based HBD Construction Inc. at the time, and was acting as the project manager for the renovation and redevelopment of a building for Greater Goods LLC on Chouteau Avenue in St. Louis. Kowert and Charles Kirkwood, the owner of Midwestern Construction, a company that was a Minority Business Enterprise, agreed to falsely list Kirkwood’s company as providing materials and performing work on the project. Kirkwood’s participation allowed the project to satisfy St. Louis requirements for 25% participation by MBEs to qualify for a 10-year tax abatement.

The MBE participation requirements seek to address historical social and economic disadvantages experienced by minority group members and to reduce minority-based barriers to and foster participation by minority-owned businesses in city contract opportunities.

Kowert issued duplicate subcontracts to Kirkwood’s company for work that was performed and materials that were supplied by two other non-MBE companies. Kowert also issued a duplicate HBD purchase order to Kirkwood’s company for materials provided by a third non-MBE company. Kowert submitted a false chart of projected costs for the redevelopment project to the St. Louis Development Corporation, the city agency charged with reviewing, approving and recommending tax abatements. The chart falsely listed Kirkwood’s MBE company as providing labor and materials valued at approximately $198,000 on the Greater Goods redevelopment project and concealed the involvement of the three non-MBE companies.

Beginning on August 4, 2020, Kowert caused 14 HBD checks worth a total of about $220,000 to be issued to Kirkwood’s company for the work performed and materials provided by the three non-MBE companies. Kirkwood deposited those checks into his company bank account and then issued checks to the three non-MBE companies, at Kowert’s direction.

Kirkwood was paid approximately $2,000 by Kowert for his role in the criminal scheme.

Kowert and HBD then caused a false application for tax abatement on behalf of the Greater Goods redevelopment project to be submitted to the St. Louis Development Corporation. The application falsely represented that Kirkwood’s MBE company had performed about $224,361 in project costs, comprising about 6 ½ % of the required 25% MBE participation in the project.

Greater Goods and its employees had no knowledge of Kowert’s scheme. His actions cost the company, which donates a significant share of its sales revenues to charities, a tax abatement of approximately $400,000 over ten years. As a result, the company was not able to carry out various projects and meet certain charitable goals, Goldsmith wrote in the memo.

The scheme also had consequences for the MBE program.

“Mr. Kowert’s actions have harmed SLDC, undermined the City of St. Louis’ MBE Program, and caused substantial injury to the duly certified and struggling minority-owned firms in the St. Louis region,” Neal Richardson, president, and CEO of SLDC wrote in a letter to Judge Autrey.

Kowert pleaded guilty in January to two counts of wire fraud.

The case was investigated by the FBI. Assistant U.S. Attorney Hal Goldsmith is prosecuting the case.

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Teamsters applaud NLRB ruling on worker misclassification

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Matt McQuaid
June 15, 2023

Teamsters General President Sean M. O’Brien issued the following statement regarding the ruling from the National Labor Relations Board (NLRB) on The Atlanta Opera, Inc., which revives an Obama-era rule that makes it easier for workers to organize and join unions:

“The Teamsters Union is pleased that the NLRB has taken a critical step in putting power back into the hands of workers and reversing an egregious rule that made it easier for corporations to misclassify hardworking men and women.

“When workers are misclassified as ‘independent contractors,’ they are deprived of the opportunity to secure the higher wages, better benefits, strong workplace protections, and job security that comes with a union contract.

“While most only associate misclassification with so-called ‘gig’ workers who work for ridesharing apps like Uber and Lyft, workers in nearly every industry have been under attack by corrupt employers and politicians that want to strip them of their employee status and the legal protections that follow.

“While we are glad to see the NLRB return power to workers, let us not forget that this should have never been the law of the land. Misclassification of employment status is the latest tool that employers have deployed in their fight against workers.

“The new ruling from the NLRB makes it more difficult for employers to deceptively misclassify workers and avoid paying employee-related expenses, like unemployment insurance, workers’ compensation, and Social Security.

“The Teamsters remain committed to helping workers across the country raise their voices and get their fair share. We look forward to continuing to fight alongside pro-worker officials at the NLRB, Department of Labor, in Congress, and in state legislatures to protect workers’ rights.”

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R.I. lawmakers pass bills to increase penalties for wage theft and employment fraud

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The bills will make it a felony to “knowingly and willfully” commit wage theft of more than $1,500, instead of a misdemeanor. House Speaker K. Joseph Shekarchi called the bills “historic.”

By Amanda Milkovits Globe Staff, June 14, 2023

PROVIDENCE — The House overwhelmingly voted for legislation Wednesday that will increase the penalties for wage theft and employment fraud — a tool that supporters say will punish employers who take advantage of workers.

House Speaker K. Joseph Shekarchi called the bills “historic.”

The companion bills, sponsored by Democratic Representative Robert E. Craven Sr., of North Kingstown, and Senator Meghan Kallman, representing Pawtucket and Providence, give more power to the state Department of Labor and Training and the attorney general’s office the ability to bring felony charges to serious offenders.

The bills will make it a felony to “knowingly and willfully” commit wage theft of more than $1,500. (Currently, it’s a misdemeanor.)

The legislation also lays out how the Department of Labor and Training will audit companies and investigate complaints of employee misclassification, following the federal regulations in the Fair Labor Standards Act. A specialized investigatory team at the DLT will have the authority to determine whether the issues are good faith errors, or violations that require civil penalties or referral to the attorney general’s office for criminal charges.

Some company owners and chambers of commerce had voiced concerns about being prosecuted by the attorney general’s office for mistakes, said Representative Jason Knight, Democrat of Barrington and Warren. So, the legislation was amended to allow investigators to filter out the innocent mistakes from incidents where employers are willfully stealing from workers, he said.

The legislation will require the attorney general’s office and the DLT to produce annual reports about wage theft and misclassified employees in Rhode Island. It also calls for more public education for workers and an assessment about the industries and areas in Rhode Island where workers are more likely to be victims of wage theft and employment fraud.

The bills also hone in on the construction industry, with enhanced criminal penalties, including felony charges, for misclassification of employees. The worst offenders, as the Rhode Island underground economy and employee misclassification task force found, were often construction companies and subcontractors, according to the task force’s annual report.

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Power At Work Blogcast #16: A State Labor Secretaries Roundtable

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June 13, 2023
Alexandra Anderson

Watch Burnes Center for Social Change senior fellow Seth Harris in conversation with Portia Wu, Secretary of Labor for the state of Maryland, Laura Fortman, Commissioner of the Maine Department of Labor, and Robert Asaro-Angelo, Commissioner at New Jersey Department of Labor and Workforce Development, as they discuss the the role and responsibilities of a labor secretary, the big successes and challenges in each state, and much more.

Secretary Wu has been serving as the Secretary of Labor for the state of Maryland since early 2023. Previously, she was Managing Director of of U.S. Public Policy at Microsoft. Before joining Microsoft, Wu served as Assistant Secretary for Employment and Training at the United States Department of Labor, overseeing federal programs that provided job training and employment services. From 2011 to 2014, she served at the White House Domestic Policy Council as Special Assistant and Senior Policy Advisor to President Barack Obama for Labor and Workforce.

Commissioner Fortman has over 20 years of experience in public policy and advocacy for the Department of Labor. Prior to being confirmed to serve as Commissioner of the Maine Department of Labor in 2019, Fortman was Deputy Administrator of the Wage and Hour Division at the United States Department of Labor from 2013 to 2017, and held her same role as Commissioner of the Maine Department of Labor under Governor John Baldacci from 2003 through 2010.

Commissioner Asaro-Angelo was appointed as Commissioner at New Jersey Department of Labor and Workforce Development in 2018. Before serving in this role, Asaro-Angelo worked for the Laborers International Union of North America (LiUNA), AFSCME and 1199SEIU. He also served as executive director of the New Jersey Democratic State Committee in 2008 during the Bush Obama transition.

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Project Labor Agreements are key to our clean energy transition

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Project Labor Agreements, or PLAs, enable contractors to know, definitively, what their costs will be, and typically include language that eliminates the risk of strikes, lockouts, or other labor disruptions.

By Marc Poulos Jun 8, 2023, 2:15pm EDT

A large-scale American energy transition is upon us. The Inflation Reduction Act, signed into law in 2022 by President Joe Biden, allocates nearly $400 billion for new energy projects, including solar, wind, carbon capture and sequestration, hydrogen, nuclear and more.

It represents what politicians in both parties have long suggested was the key to American energy independence: an “all of the above” strategy.

That is, if we can deploy the sufficiently skilled workforce to build, maintain and operate these facilities.

So how do we do it?

First, we need to acknowledge that for all of their environmental risks, America’s legacy fossil fuel sector has produced a largely sustainable workforce model. The industry long ago recognized the importance of partnership with skilled trade unions to attract, train and retain the skilled workforce it needed. Not surprisingly, U.S. government data has found that legacy energy projects typically feature two to three times the level of union density as renewable projects.

Another study, analyzing the energy industry in Minnesota, North Dakota and South Dakota, found that clean energy projects were simply not competitive in the labor market relative to their legacy industry peers, and increasingly reliant on lower-skilled workers from out-of-state to build projects.

To its credit, the Inflation Reduction Act has recognized the importance of job quality and local workforce development as central tenets of America’s clean energy transition. Most of the tax incentives linked to new project development require minimum labor standards, including prevailing wages and apprenticeship utilization.

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III FFC Celebrates Passage of Colona Responsible Bidder Ordinance

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May 31.2023

Indiana, Illinois, Iowa Foundation for Fair Contracting Celebrates Passage of Colona Responsible Bidder Ordinance

Colona passes local ordinance to promote workforce development, protect local tax dollars

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COLONA, IL – Last week, Colona City Council passed a local responsible bidder ordinance (RBO) in a 9-0 vote with Colona Mayor Donald Ropp casting the final vote.

A responsible bidder ordinance (RBO) is a resolution adopted into a public body’s procurement codes that specifies certain criteria that a contractor must meet in order to be eligible to perform work on behalf of that community. Ultimately, an RBO ensures that public projects are awarded to responsive and responsible contractors who employ skilled tradespeople, deliver the highest quality of work, and provide more taxpayer value than contractors who cut corners in the areas of training, labor, and safety.

“This is a big win for the entire Colona community,” said Indiana, Illinois, Iowa Foundation for Fair Contracting (III FFC) Regional Manager Andy Waeyaert. “Passing a Responsible Bidder Ordinance protects taxpayer dollars while spurring local economic growth and supporting good-paying jobs. Plus, the apprenticeship requirements in this RBO help create a highly trained workforce ready to partner with local businesses to meet the construction needs now and in the future. On behalf of the III FFC, we celebrate the passage of another RBO and thank Colona City Council and Mayor Ropp for their support in raising standards in the local construction industry.”

The Colona ordinance includes “5-for-5” apprenticeship language to encourage workforce development by requiring proof that contractors and subcontractors bidding on Colona public works projects are participating in US Department of Labor-approved apprenticeship training programs that have graduated at least five (5) apprentices in each of the past five (5) years for each of the construction crafts to be performed on the project.

III FFC was established to increase market share for responsible contractors, work opportunities for skilled craftsmen and craftswomen, and value for taxpayers. III FFC raises standards in the construction industry by advocating for responsible public policies that reward work, ensure business growth, and create broad-based prosperity. You can find out more about responsible bidder ordinances and the III FFC on our website at www.iiiffc.org.

FOR IMMEDIATE RELEASE: May 31, 2023

CONTACT: Jill Gigstad, III FFC, (815) 254-3332 EXT 6, jgigstad@iiiffc.org

Shapiro, Murphy announce partnership for labor law enforcement

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April 17, 2023

PHILADELPHIA – New Jersey Gov. Phil Murphy and Pennsylvania Gov. Josh Shapiro last week visited the International Union of Painters and Allied Trades (IUPAT) District Council 21 training facility in Philadelphia to tour the innovative center and announce their intention to form an interstate task force to address wage theft and worker misclassification in the two states.

The interstate task force will work to better foster the collaborative enforcement of each state’s labor laws, which include robust worker protections, while enabling healthy business competition between good actors.

New Jersey and Pennsylvania entered a regional memorandum of understanding agreement in 2019 to facilitate data sharing, joint investigations and cooperative referrals. Thursday’s commitment to a continued partnership between the two states bolsters those efforts and demonstrates Shapiro’s and Murphy’s ongoing focus on worker protections.

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Earlier in the day, the governors directed Rob Asaro-Angelo, commissioner of the New Jersey Department of Labor and Workforce Development, and Nancy Walker, acting secretary of the Pennsylvania Department of Labor & Industry (L&I), to ensure a continued partnership between the states, highlight specific opportunities the departments should pursue, and request the identification of key individuals within each agency to serve on the interstate task force.

“Cooperative efforts with our partners in Pennsylvania are crucial to bringing fairness to workers and businesses in our region,” said Asaro-Angelo. “This teamwork among states ensures consistent enforcement, and dissuades bad actors from exploiting workers on both sides of the Delaware River.”

“Worker misclassification is not a phenomenon that exists only in the construction industry or in large metropolitan areas. Law-abiding contractors are losing out on bids across the commonwealth, and workers in virtually every sector are losing out on rights and protections they’ve earned as an employee. Workers represented by unions are protected from misclassification, but too many workers are vulnerable to the exploitative actions of bad actors,” L&I Acting Secretary Nancy Walker said. “I look forward to continued collaboration with our partners in New Jersey to hold accountable those employers who think they can get away with cheating the system.”

In response to growing misclassification problems in New Jersey, Murphy issued Executive Order No. 25 on May 3, 2018, establishing an interagency misclassification task force to “promote fairness, fight against discrimination, and work to end unfair labor practices… that create an unfair advantage over companies that play by the rules and hurt our working families.” New Jersey has since been considered the “gold standard” for addressing worker misclassification. Similarly, the Pennsylvania Joint Task Force on Misclassification of Employees, created by Act 85 of 2020, made 15 recommendations to improve data sharing, strengthen compliance laws, and increase interagency collaboration, all of which are furthered by Thursday’s action.

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Maryland construction company owes the District money for trying to cheat its employees

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Author: Samantha Gilstrap
Updated: 8:07 PM EDT April 18, 2023

As part of the settlement, the company also agreed not to bid on or provide work under any D.C. government contracts for one year.

WASHINGTON — A construction company operating out of Washington, D.C. owes the District money after trying to cheat its employees out of sick leave and other employment benefits to which they were legally owed, according to the Attorney General’s Office.

Authorities say Maryland Applicators intentionally misclassified employees as independent contractors to avoid having to provide them with the proper sick leave and other employment benefits. Now, the company must pay $835,000 to the District.

As part of the settlement, the company also agreed not to bid on or provide work under any D.C. government contracts for one year, D.C. Attorney General Brian Schwalb said.

“Maryland Applicators denied District workers the sick leave and other employment benefits they had earned by misclassifying them as independent contractors rather than employees. This not only cheated the workers but gave Maryland Applicators an unfair advantage over their competitors who follow the law,” Schwalb said. “My office is committed to protecting District workers, ensuring they receive the wages and benefits they are legally owed, and leveling the playing field for all law-abiding District businesses.”

Maryland Applicators is a Maryland corporation that provides construction services on projects in Washington, D.C.

Authorities claim it employed dozens of misclassified workers and also secured the services of hundreds of additional misclassified workers through subcontracts with other companies.

The misclassification is as a form of wage theft that reduces costs for companies at the expense of employees, Schwalb said.

Authorities say misclassifying employees as independent contractors deprives them of rights that employees are entitled to, such as the minimum wage, overtime compensation, and paid sick leave.

Illegal misclassification also deprives the District of tax revenue, unemployment insurance premiums, and workers compensation contributions.

D.C. construction companies that misclassify workers unlawfully avoid at least 16.7% in labor costs compared to companies following the law, providing an unfair advantage over their competition.

As a result of the settlement, Maryland Applicators must:

  • Pay $835,000 divided as follows:
    • $489,000 will be paid to the District.
    • $346,000 will be paid to affected workers.
  • Change its practices to ensure that all workers hired for projects in the District are properly classified in compliance with District law and receive the wages and benefits they are legally owed.
  • Refrain from bidding on or providing work on contracts paid by the District government in the District for one year.

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For the first time, Philly enforces its wage theft law by suing an employer who stiffed workers

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The Philadelphia Inquirer
by Juliana Feliciano Reyes
Apr 5, 2023

The lawsuit, against Joe Carvalho of Carvalho Construction, represents an escalation of the city’s efforts to enforce wage theft violations.

For the first time in seven years, the City of Philadelphia has sued an employer who broke the city’s wage theft law.

The lawsuit represents an escalation of the city’s efforts to enforce its 2016 wage theft law. In some cases, it can take years for workers to get paid after they win a wage theft claim; some never get paid at all.

The Law Department, which hired a dedicated attorney last spring to handle these kinds of cases for the Department of Labor’s Office of Worker Protections, has begun taking legal action “to force bad actors into compliance,” a spokesperson for the Office of Worker Protections said in a statement. Lawsuits are “an avenue of last resort,” the spokesperson said.

Bad actors are employers that broke the law but refuse to comply with city orders and pay workers what they’re owed. More than 90% of employers that have broken the law comply, the spokesperson said.

The city filed a complaint in Common Pleas Court earlier this year against Joe Carvalho, a Philadelphia construction company owner who the city says broke its wage theft law twice.

In March 2021, Carvalho didn’t pay an employee for eight days of work, owing him $1,105 in wages and overtime, a city investigation found. Carvalho had said he would pay the worker $130 per day.

The following month, the worker repeatedly asked for his pay and Carvalho ignored the texts or “responded with curse words,” according to a city violation notice.

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Michigan lawmakers repeal right-to-work, revive prevailing wage

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The Detroit News | March 21, 2023
Beth LeBlanc & Craig Mauger

Lansing — The Democratic-led Michigan Legislature voted along party lines Tuesday on landmark legislation to restore prevailing wages for state construction projects and repeal the right-to-work law that barred union contracts from requiring membership fees as a condition of employment.

The Michigan Senate took a final vote on the bill to repeal the right-to-work law for private employers and sent the measure to Gov. Gretchen Whitmer’s desk on Tuesday afternoon. The Senate passed the bill 20-16 along party lines after the legislation cleared the House in a 56-52 party-line vote.

The House on Tuesday also approved two other labor bills in the package, one House bill that helps to require union-rate wages for public construction jobs and another bill that would repeal right-to-work for public sector employees.

The votes Tuesday were significant for the labor movement nationally, said Ron Bieber, president of the Michigan American Federation of Labor and Congress of Industrial Organizations (AFL-CIO).

“It’s a huge day for the working people of Michigan,” Bieber said.

Rep. Regina Weiss, the Oak Park Democrat who sponsored the public sector right-to-work repeal, said the final passage of the bills Tuesday delivered on changes promised by the new Democratic majorities when they took office in January. Weiss rejected arguments that the right-to-work repeal would hurt the state’s economy.

“To me, it’s not a choice,” Weiss said. “You don’t have to choose to support business and then also choose to screw over workers. You can support business, you can support workers at the same time.”

The legislation headed to Whitmer’s desk would allow union contracts to require workers to pay agency fees for the cost of representation at the bargaining table with their employer.

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